Re La Fontaine, Peter Allan Ex Parte Commonwealth Bank Of Australia
[1996] FCA 939
•31 OCTOBER 1996
CATCHWORDS
Bankruptcy - application for adjournment of creditors petition - principles applicable where application based on ground that appeal pending from judgment debt, alleged act of bankruptcy being failure to comply with bankruptcy notice requiring payment of the debt - whether court is satisfied under s 52 of the Bankruptcy Act of the existence of the debt on which the petitioning creditor relies - relevance of prospects of success in appeal on purely technical grounds not going to existence or enforceability of debt on which judgment based.
Bankruptcy Act 1966, s 52
District Court Rules, Pt 17 r 1
Wren v Mahony (1972) 126 CLR 212 at 224, 225
Corney v Brien (1951) 84 CLR 343
Maddestra v Penfolds Wines Pty Ltd (1993) 44 FCR 303 at 306
Re Scaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 335
Re King; Ex parte Gallagher Ryan & Maloney v King (1994) 54 FCR 493 at 496, 497
Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 at 148
Re Rhodes; Ex parte Heyworth (1984) 14 QBD 49
Bayne v Baillieu (1907) 5 CLR 64
Re Verma; Ex parte DCT (1985) 4 FCR 181
Adamopoulos v Olympic Airways SA (1990) 95 ALR 525
Rahme v Commonwealth Bank of Australia 20 December 1991, unreported
Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287
Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301 at 309
RE: PETER ALLAN LA FONTAINE EX PARTE: COMMONWEALTH BANK OF AUSTRALIA
No. NP1010 of 1996
CORAM:Lehane J
PLACE:Sydney
DATE:31 October 1996
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
BANKRUPTCY DISTRICT NEW SOUTH WALES ) No. NP1010 of 1996
RE:PETER ALLAN LA FONTAINE
Applicant
EX PARTE:COMMONWEALTH BANK OF AUSTRALIA
(A.C.N. 123 123 124)
Respondent
CORAM:Lehane J
PLACE:Sydney
DATE:31 October 1996
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The application for adjournment be dismissed with costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
BANKRUPTCY DISTRICT NEW SOUTH WALES ) No. NP1010 of 1996
RE:PETER ALLAN LA FONTAINE
Applicant
EX PARTE:COMMONWEALTH BANK OF AUSTRALIA
(A.C.N. 123 123 124)
Respondent
CORAM:Lehane J
PLACE:Sydney
DATE:31 October 1996
REASONS FOR JUDGMENT
LEHANE J:
Nature of proceedings
This an application by Mr La Fontaine, who is the debtor named in a creditor's petition presented by the Commonwealth Bank of Australia (the Bank). The application in terms seeks an order:
That the Creditor's Petition presented on 22 August 1996 and served on the Applicant on 9 September 1996 be stayed pending further Order of the Court.
There was a suggestion in argument that subs 52(3) of the Bankruptcy Act 1966 was relevant but in my view clearly it is not: the subsection applies only to "proceedings under a sequestration order", that is necessarily proceedings after such an order has been made. The application should, I think, be treated as one for an adjournment of the hearing of the petition.
The act of bankruptcy on which the Bank relies is that Mr La Fontaine failed, on or before 9 July 1996, either to comply with the requirements of a bankruptcy notice served on him on 6 June 1996 or to satisfy the Court that he had a counter‑claim, set‑off or cross demand equal to or exceeding the sum specified in the bankruptcy notice. The bankruptcy notice in turn required payment of the sum of $55,457.36, claimed to be the amount due by Mr La Fontaine to the Bank under a final judgment of the District Court of New South Wales. Mr La Fontaine has lodged a notice of intention to appear at the hearing of the petition in which he states as his ground of opposition that:
The debtor denies that he is indebted to the creditor in the sum of $56,569.74 under the judgment of the District Court of New South Wales referred to in paragraph 2 of the petition, such judgment being the subject of an appeal to the Court of Appeal of New South Wales.
The adjournment for which La Fontaine now applies is sought particularly on the ground that that appeal is pending.
Background: accommodation provided by the Bank
It is necessary to consider the circumstances in more detail. Mr La Fontaine is a solicitor. He conducted a current cheque account with the Bank at a branch at Taylor Square. Between 30 September 1992 and 14 January 1993 the balance of the account fluctuated; at times it was in credit, at other times it was overdrawn; at the close of business on 14 January 1993 it was overdrawn to the extent of $4,521.48. By letter to the Bank dated 7 January 1993 Mr La Fontaine sought formal approval for a "temporary loan" of $35,000, to be repaid from the proceeds of sale of some property, due to be received on 30 April 1993. The Bank acceded to that request by a letter to Mr La Fontaine dated 13 January 1993. In the opening paragraph of the letter the Bank said:
We are pleased to inform you that the Bank has approved an [sic] temporary overdraft limit of $35,000 to assist repay [a loan which apparently Mr La Fontaine was then obliged to repay].
The letter proceeded to set out the terms of the overdraft: it was to be subject to the Bank's usual terms "for loans of this type"; the debit balance on the account was repayable on demand which the Bank might make at any time but was in any event "subject to clearance" on 30 April 1993. The letter provided for the payment of interest and fees, imposed certain other conditions and, particularly, required Mr La Fontaine to execute the Bank's "standard application for advance form". Mr La Fontaine signed that form; it was dated 13 January 1993. It contained provisions commonly found in such documents; in particular, paragraph c provided:
The Bank may from time to time at its pleasure cancel or vary the limit of accommodation granted to the applicant/s and/or vary the rate of interest ... applicable to the accommodation granted to the applicant/s.
On 15 January 1993 a cheque was drawn on the account for $31,581.60 which increased the debit balance to $36,103.08. From that time until the close of business on 29 April 1993 the account continued in debit. The debit balance fluctuated, but overall it increased inexorably and quite rapidly. By the close of business on 9 March 1993 it stood at $75,127.75. On 10 March 1993 the Bank wrote to Mr La Fontaine, referring to discussions and informing him that the Bank had agreed to an increase in "your temporary overdraft limit" from $35,000 to $77,000. The letter told Mr La Fontaine that the approval was on the Bank's usual terms and the conditions outlined in the letter of 13 January. Among other things, that meant no doubt that full clearance was required by 30 April. The balance continued to fluctuate, but overall increased further so that on 29 April 1993 it stood at $84,439.23.
On 30 April 1993 the sum of $86,000 was deposited to the account; the amounts of four cheques were, however, debited on the same day so that at the close of business there was a debit balance of $398.23. Once again the debit balance gradually increased (though, of course, it continued to fluctuate from day to day). By 16 July it had reached $35,118.93. It was then reduced by deposits somewhat exceeding $10,000. By the end of August, however, the debit balance had increased to $49,303.33. By 10 February 1994 it was $49,016.42; on that date, in circumstances to which I shall return, the Bank appears to have stopped further operations on the account except by way of reduction of
the outstanding balance. Since that time there have been some deposits to the account, of relatively small amounts; amounts have been debited for interest and fees.
The evidence of the dealings between Mr La Fontaine and the Bank after 30 April 1993, in relation to the account, is by no means complete but it is sufficient to give a reasonably clear picture. On 3 June 1993 the Bank sent Mr La Fontaine a facsimile message informing him that the then debit balance of $27,121.68 "cannot be allowed". There was a threat to dishonour a particular cheque unless funds were lodged to reduce the balance to about $20,000. Then on 25 August 1993 the Bank wrote again to Mr La Fontaine. The opening paragraph of the letter read:
Cheques drawn today have increased the debit balance on [the account] to $47,724 debit. As there are no arrangements to overdraw to this extent the cheques have been returned unpaid.
The writer of the letter suggested a meeting to "discuss your intentions for clearance of this commitment". Then on 30 December 1993 the Bank wrote again, referring to discussions, acknowledging that the debt had been reduced to $44,980 and saying that the Bank now required "formalisation of arrangements". The Bank required certain financial information and made what was perhaps, in the context, a somewhat cryptic threat:
If the debt has not been cleared beforehand, the Bank will require that the debt be placed "In Reduction" and principal and interest payments commenced over the shortest practical term.
Then on 1 February 1994 the Bank wrote again, noting that no response had been received to the letter of 30 December and continuing:
Regrettably, the Bank has today dishonoured a cheque drawn on your abovementioned account as the resultant debt was in excess of the $50,000 temporary limit. The Bank now needs to formalise arrangements regarding repayment of the existing debt.
This is, so far as I am aware, the earlier of only two mentions in the evidence of a "temporary limit" of $50,000. The Bank once again asked for financial information and once again threatened, should satisfactory arrangements not be made within 14 days, to place the account "In Reduction". The next correspondence in evidence is a letter dated 14 February 1994 from Mr La Fontaine to the Bank. It referred to a fax of 11 February from the Bank. The letter continued:
The decision to stop our general account is peremptory. The account has been operating in a proper manner and has gone over the $50,000 limit only on a few occasions and for a few days. Otherwise there has been a steady deposit record. Of course there has [sic] been withdrawals.
The letter requested a reconsideration of the stopping of the account and that letters of demand not be sent; it stated that Mr La Fontaine would not be in a position "to speak about a formal reduction programme until after the next few months". The letter contained an acknowledgment, to which the Bank drew my attention:
It is acknowledged that all monies properly due to you are in fact due and letters of demand will simply create more problems.
On 17 February the Bank's solicitor wrote to Mr La Fontaine demanding payment of the outstanding balance and threatening legal proceedings if payment was not made. Shortly after that the Bank commenced the proceedings in the District Court, to which I must now turn.
The District Court proceedings
The Bank obtained a default judgment against Mr La Fontaine on 10 June 1994, on the basis of which a bankruptcy notice was issued. The judgment, however, was set aside by consent, apparently on the footing that the Bank's statement of liquidated claim was defective. The detail of that does not matter. The Bank filed an amended statement of liquidated claim on 25 March 1994. It claimed $48,499.02. The Bank pleaded its cause of action as follows:
1.The Plaintiff is a Company registered under the Corporations Law of the ACT and is entitled to sue in its corporate form.
2.By letter to the Plaintiff from the Defendant dated 7 January 1993 the Defendant requested that the Plaintiff lend the Defendant money.
3.Pursuant to the request the Plaintiff lent the Defendant the sum of $35,000.00 ("the Loan").
4.It was a term of the Loan that the Loan was repayable by 30 April 1993.
5.The Defendant is in default under the Loan and has failed to repay the money.
6.The amount owed to the Plaintiff by the Defendant as at 10 February 1994 being the outstanding balance of the Loan was $48,499.02.
7.By letter dated 17 February, 1994 addressed to the Defendant, the Plaintiff demanded payment of the outstanding balance of the Loan.
8.The Defendant has failed to pay the amount demanded.
9.The Plaintiff claims:
(a)the sum of $48,499.02;
(b)[presumably a claim for interest: the copy in evidence is incomplete];
(c)Costs.
As the Bank obviously intended to claim the balance of the overdrawn current account, not a sum of $35,000 lent in January 1993 (in fact it appears that that precise sum was never lent though that was the limit to which in January 1993 the Bank permitted Mr La Fontaine to draw on the account), the form of the pleading is surprising.
In his notice of grounds of defence Mr La Fontaine admitted paragraphs 1 and 2; he did not admit that the Bank lent him $35,000, neither did he admit that there was a loan by the Bank to Mr La Fontaine repayable by 30 April 1993 (the loan thus denied he then referred to in the grounds of defence as "the subject loan"). He denied that if there were such a loan he failed to make a payment to the Bank: by way of particulars, he referred to the sum of $86,000 credited to the account on 30 April 1993. He proceeded to deny that at 10 February 1994 the outstanding balance of the "subject loan" was $48,499.02 and that the Bank demanded payment of the outstanding balance of the "subject loan". He admitted that he had not paid all the amounts actually demanded by the Bank. He
denied that "as a consequence of the facts pleaded by the plaintiff" the Bank was entitled to claim from him the sum of $48,499.02 or any part thereof, interest thereon or costs.
The defendant was thus saying (in addition to putting the Bank to proof the loans said to have been made in January) that anything lent by the Bank before 30 April 1993 was repaid on that day and that any balance later outstanding on the account, and any amount which the Bank may have demanded, had nothing to do with the "subject loan" so that the Bank's claim as pleaded, being a claim for the "subject loan" and interest on it, must necessarily fail. The Bank, however, did not then seek to amend further its statement of liquidated claim.
In that state of the pleadings, the matter proceeded to a hearing before Gallen DCJ on 28 March 1996. No transcript of the proceedings is in evidence, but I think it was accepted that notes (which are in evidence) made by the Bank's solicitor are, in most respects, a substantially accurate record of what happened. In particular the correspondence to which I have referred, both preceding and following 30 April 1993, was admitted into evidence as was a bundle of statements of the account for those periods. The documents were admitted, ultimately, without objection: counsel for Mr La Fontaine apparently objected to the admission of the Bank's letter of 30 December 1993 on the footing that, as correspondence relating to events which occurred 30 April 1993, it was not relevant to the case pleaded by the Bank, but the objection was withdrawn. Apparently counsel for Mr La Fontaine submitted that the Bank must fail on the pleadings because the sum claimed was the "loan" made before, and repaid on, 30 April 1993.
There was some discussion concerning a possible amendment of the Bank's pleading, the precise terms of which are not entirely clear, but the Bank did not proceed with an application to amend. At the conclusion of counsel's submissions his Honour gave judgment in favour of the Bank. His Honour accepted the submission on behalf of Mr La Fontaine that "any monies advanced to the defendant after 30 April 1993 is by way of a separate transaction and that as pleaded the plaintiff is not entitled to recover these funds". His Honour held, in effect, that the debt claimed in the proceedings was on a single current account on which the Bank had made agreed advances up to 13 April (sic, but no doubt 30 April was intended) and that after that date "the accommodation continued" though "against the wishes of the [Bank]".
Bankruptcy proceedings; application to set aside judgment; appeal; stay application
On 6 June 1966 the bankruptcy notice was served on Mr La Fontaine. That provoked a notice of motion in the District Court to set aside the judgment and an application to this court to set aside the Bankruptcy Notice. In his affidavit in support of the application to this Court Mr La Fontaine alleged, among other things, that:
On 30 April 1993 and 3 May 1993 I entered into an Agreement with Frank Heather [the Manager of the Taylor Square Branch of the Bank] under which he would allow me a new overdraft on my general account while I had a certain $180,000 in Controlled Money. I continued to operate on an Overdraft and retained and still retain the $180,000 in Controlled Money. I never exceeded the $180,000 Overdraft. This agreement has never been varied or cancelled.
The correspondence lends some support to the suggestion that a "temporary" overdraft was in fact agreed at some time, though none to the suggestion that the amount of it was $180,000. Secondly, it seems clear that there could be no set‑off, against Mr La Fontaine's debt to the Bank, of Controlled Money - i.e. funds held for other persons. The Registrar refused the application to set aside the Bankruptcy Notice; there is no suggestion that a review of that decision was ever sought. Some time later, the motion to set aside the District Court judgment was dismissed by consent, with no order as to costs. In the meantime, the Bank's petition had been issued and served. Mr La Fontaine had informed the Bank, before the petition was issued, that he proposed to seek leave to appeal out of time to the Court of Appeal against the District Court judgment. He applied for that leave; it was granted, over the opposition of the Bank.
Mr La Fontaine's grounds of appeal are lengthy. In essence they are that his Honour erred in accepting into evidence and considering material relating to transactions other than the original advance; in not confining the matter to the pleadings; in not requiring the Bank to amend its pleadings (and permitting Mr La Fontaine to lodge an amended defence); in failing to indicate his preferred construction of the Bank's pleadings before giving judgment; in failing to find that the initial advance had been repaid in full; and in finding that Mr La Fontaine was in default. It is also claimed that his Honour erred in "not determining that the Respondent was estopped from asserting a claim other than that pleaded by the Respondent in its Amended Statement of Claim dated 25 March 1994 and filed on 30 September 1994". That, of course, does not purport to be a full statement of the grounds of appeal, but I think it summarises their main elements.
Mr La Fontaine had, when seeking leave to appeal, applied for a stay of the District Court judgment pending the appeal. That application was refused by the Registrar of the Court of Appeal, but on the basis that it was open to Mr La Fontaine to apply again for a stay once he had lodged his notice of appeal. He made such an application, and it was heard by Priestley AP on the day before the present application came before me. His Honour refused a stay. Counsel provided me with a copy of his Honour's reasons. His Honour held that the material before the trial judge at the conclusion of the Bank's case "provided an overwhelming case that the amount claimed was owing to bank"; that if Mr La Fontaine's submissions as to the particulars of claim and the way the case proceeded before the Judge was correct, "there might be some prospects of success, although even then of a very technical kind, in his appeal"; however, Mr La Fontaine knew what material was before the Judge, must have been aware of the Judge's view of the proper construction of the particulars of claim and could have been left in no doubt of the case which he was being asked to meet. The evidence of the alleged agreement with Mr Heather, even if accepted in full, was not inconsistent with the Bank's case. Accordingly, "both from the point of view of technicality and also from the point of view of substance, the chances of Mr La Fontaine having any success in his appeal are, to put it in a conservative way, not sufficient to warrant me in granting a stay of the judgment pending the resolution of the appeal". His Honour was, of course, aware that the judgment was the foundation of a bankruptcy notice, failure to comply with which had led to the issue of a petition shortly to be heard by this Court.
"Going behind" judgment
There was discussion in argument of the authorities dealing with the power of a Bankruptcy Court to "go behind" a judgment on which a petitioning creditor relies and the circumstances in which that power will be exercised. The existence of the power is, of course, a corollary of the requirement, under s 52 of the Bankruptcy Act, that the Court be satisfied of the existence of the debt on which the petitioning creditor relies: Wren v Mahony (1972) 126 CLR 212 at 224 per Barwick CJ. This is not, however, a case where any substantial reason appears for questioning whether behind the judgment there was in truth and reality a debt due to the Bank (Wren v Mahony at 224, 225). The evidence to which I have referred clearly indicates the existence of indebtedness of Mr La Fontaine to the Bank on an overdrawn current account. Equally clearly it is that indebtedness on which the judgment is based (cf Corney v Brien (1951) 84 CLR 343). The attack on the judgment is based not on a proposition that the Judge was wrong in deciding, on the evidence admitted at the trial, that the debt for which he gave judgment existed but that the Bank's pleading did not adequately state the factual basis of the cause of action said to give rise to the debt. But, as the Full Court said in Maddestra v Penfolds Wines Pty Ltd (1993) 44 FCR 303 at 306:
When the issue arises whether there is a debt sufficient to support a judgment on which a bankruptcy petition or a sequestration order is founded, the Bankruptcy Court is not concerned with questions as to the sufficiency of the pleading or of the proofs of the debt offered in the Court in which the judgment has been obtained. Its only concern is to be satisfied by proper proof before it that there in truth exists a debt and that that debt arose on the same basis upon which the judgment was obtained.
See also Re Scaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 335; Re King; Ex parte Gallagher Ryan & Maloney v King (1994) 54 FCR 493 at 496, 497.
Effect of pending appeal
The real question in this case is whether the Court should proceed to sequestrate Mr La Fontaine's estate in circumstances where an appeal is pending against the judgment for the debt on which the petition is based. The principle to be applied was stated by the Full Court in Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 at 148 as follows:
It is ... well established that in general a Court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds: Re Rhodes; Ex parte Heyworth (1984) 14 QBD 49; Bayne v Baillieu (1907) 5 CLR 64 and Re Verma; Ex parte DCT (1985) 4 FCR 181.
These cases rest on the broad principle that before a person can be made bankrupt the Court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi‑penal consequences.
That principle was applied by the Full Court in Adamopoulos v Olympic Airways SA (1990) 95 ALR 525. Burchett and Gummow JJ said at 531:
An appeal against the very judgment which founds the bankruptcy notice is a matter of significance requiring advertence to the possibility that the appeal may be justified. Nor is it realistic to entertain any confidence, in other than a special case, that a trustee in bankruptcy will decide to pursue an appeal with merit. ... A much more likely consequence of a sequestration order is the abandonment of the appeal, whatever its merits, and its dismissal for non‑prosecution.
Their Honours recognised, however, that the principle, though generally applicable and based on important considerations of policy, nevertheless admits of exceptions: they referred to Re Verma; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181 in which Beaumont J held, applying authorities dealing with the principles on which a winding‑up application would be stayed, that it was appropriate to consider the substantive nature of the grounds of appeal in order to ascertain the extent to which there was a genuine contest (see 186, 187). Pincus J, in his concurring judgment in Adamopoulos put the matter (at 526) rather more broadly:
Where an adjournment of the petition is sought on the ground that an appeal has been instituted against the judgment debt underlying the proceedings, a variety of factors may have an important bearing on the exercise of the discretion. It may be influenced by evidence that the judgment debtor is, in any event, insolvent, by the Court's forming the opinion that the appeal, although arguable, has little chance of success, by consideration of the possibility that the costs of the appeal may substantially diminish the amount available for distribution to creditors and by other matters. ... It would be unfortunate if the general principle stated in Ahern's case were to be applied too rigidly, particularly where execution on the judgment appealed against has not been stayed, so that the judgment creditor may have the debtor's assets sold pending the appeal. ...
In this case counsel for Mr La Fontaine, in support of his application for an adjournment, argued that the District Court is a court of strict pleading, that the cause of action as pleaded clearly related only to the initial advance and accordingly there must be a substantial prospect of success in the appeal. Then, in answer to a suggestion that, whether or not that might be so, there was ample evidence that the debt on which the judgment was based is in fact owing, counsel put two propositions. One was that the course which the proceedings took in the District Court meant that Mr La Fontaine was unable to adduce evidence which he might otherwise have led in opposition to the Bank's claim that the balance on the account was due and payable: he referred particularly to the agreement with Mr Heather alleged in Mr La Fontaine's affidavit to which I have referred. Secondly, he said that if the appeal were successful it was strongly arguable that the Bank would be prevented by the Anshun principle from commencing fresh proceedings to recover the outstanding balance of the account: he relied particularly on the decision of the Court of Appeal in Rahme v Commonwealth Bank of Australia 20 December 1991, unreported.
I shall deal first with the Anshun point. In my view, counsel's reliance on Rahme is misplaced. The relevant principle was stated by Priestley JA (with whom Meagher JA and Hope AJA agreed) (at 7) as one which applies:
... to a proceeding in which a party is asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second proceeding is being bought.
If the appeal were to succeed on the grounds on which it has been instituted, that would be because the Judge was wrong in treating the claim as one for the balance of the account at the time the action was brought rather than merely one for the recovery of the initial advance. It would follow that the cause of action properly before the District Court was one based exclusively on the facts relating to the dealings between Mr La Fontaine and the Bank between January and April 1993 only. If the Bank were then to assert in fresh proceedings a cause of action for the recovery of the balance claimed to be outstanding, the facts founding that cause of action would be different: the relevant facts would include those relating to the dealings between the parties after 30 April 1993. It may be true (see Rahme and also Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287) that precise correspondence between the facts giving rise to the two causes of action concerned is not essential to the operation of Anshun principle; but that is of no help to Mr La Fontaine here, because the facts required to be established to make good a claim for the balance of the account are substantially different from those which would be required to make good a claim (to the extent that it remained possible) to recover the initial advance only.
I am glad to discover that I am not alone in being slightly bemused by the phrase "court of strict pleading". In Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301 at 309 Owen J said that it "is true that the District Court is not a Court of strict pleading, whatever that phrase may mean ...". I think it may confidently be taken that if the District Court was not a Court of strict pleading in 1953 it is not such a Court (whatever such a Court may be) now. It is true that Owen J in that case expressed a somewhat
strict view about the extent to which it was proper, in a case before the District Court, to depart from the issues as defined by the pleadings. It should immediately be added, however, that the other two members of the Court, Street CJ and Herron J, expressed views that were considerably less strict (see also (1954) 28 ALJ 66). Counsel for Mr La Fontaine referred me to the District Court Rules Pt 17 r 1. The rule is in familiar terms. Sub‑rule (1) is to the effect that the Court may, at any stage of proceedings, order that a party have leave to amend any document filed by that party. Sub‑rule (2), on which counsel particularly relied, provides:
All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in any proceedings, or of avoiding multiplicity of proceedings.
Two things are evident: one thing is that the Judge could, had he thought it necessary or appropriate, have given leave to amend the statement of liquidated claim and should have done so had he thought it necessary for the purpose of determining the real issues between the parties. Secondly (and this appears from the judgment), his Honour found that he could construe the pleadings in a way which in fact raised the real issue between the parties: that is, the issue which his Honour decided in favour of the Bank.
This Court must, of course, examine for itself the evidence tendered to prove the existence of the debt on which a petitioning creditor relies. It is relevant, however, that Priestley AP refused a stay; and I see no answer to the conclusion reached by his Honour on the stay application that, apart from the pleading point, the Bank's case in relation to
its debt was an overwhelming one. Anshun aside, the only matter mentioned before me which might be raised in opposition to the Bank's claim, should the opportunity arise, was the alleged agreement between Mr La Fontaine and Mr Heather. As Priestley AP points out, however, whatever view one might take of that, there is no evidence that what was agreed was anything other than a temporary overdraft and one to which the Bank's standard terms applied, so that the Bank was entitled to demand payment as it did.
As for the pleading point, it is again easy to see the force of Priestley AP's conclusion as to Mr La Fontaine's chances in his appeal. However inartistically the Bank's pleading was drawn, it did refer to correspondence the terms of which agreed to the provision not of a loan of a particular amount but of overdraft accommodation on a particular account, within a particular limit, subject to terms which (although providing among other things for repayment in full by 30 April 1993) contemplated variation and entitled the Bank to require payment on demand. It clearly referred to a sum outstanding after 30 April 1993 and to a demand for payment of such a sum. No doubt the statement of liquidated claim merits the criticism which has been accorded it. I cannot think, however, that read as a whole it was calculated to inform Mr La Fontaine of anything other than that what was sought to be recovered was the outstanding balance of the current overdrawn account. I am unconvinced by the argument based on surprise and lack of opportunity to tender evidence of events after 30 April 1993. Finally, on the view I have taken of the Anshun point, Mr La Fontaine's success in the appeal would not in any event result in the Bank being disabled from recovering from him the debt which he appears clearly to owe.
Conclusion
For those reasons, in my view this case falls within an exception to the general rule and the existence of the appeal should not lead to an adjournment of the hearing of the petition. I, therefore, dismiss the application for adjournment, with costs.
I certify that this and the preceding 19 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.
Associate:
Dated: 31 October 1996
Heard: 22 October 1996
Place: Sydney
Decision: 31 October 1996
Appearances: Mr R P Freeman of counsel instructed by La Fontaine appeared for the applicant.
Mr G K Burton of counsel instructed by Abbott Tout appeared for the respondent.
0
15
0